United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 11, 2005 Decided July 1, 2005
No. 04-5203
IN RE: MEDICARE REIMBURSEMENT LITIGATION
BAYSTATE HEALTH SYSTEMS, D/B/A BAYSTATE MEDICAL
CENTER, ET AL.,
APPELLEES
MICHAEL O. LEAVITT, SECRETARY, DEPARTMENT OF HEALTH
& HUMAN SERVICES,
APPELLANT
Appeal from the United States District Court
for the District of Columbia
(No. 02cv00601)
(No. 03mc00090)
Anne Murphy, Attorney, U.S. Department of Justice, argued
the cause for appellant. With her on the briefs were Peter D.
Keisler, Assistant Attorney General, Kenneth L. Wainstein, U.S.
Attorney, and Anthony J. Steinmeyer, Assistant Director.
Christopher L. Keough argued the cause for appellees.
With him on the brief were John M. Faust and Stephanie A.
Webster.
Before: SENTELLE, ROGERS, and TATEL, Circuit Judges.
2
Opinion for the Court filed by Circuit Judge TATEL.
TATEL, Circuit Judge: In this case, the district court
ordered the Secretary of Health and Human Services to make
statutorily mandated payments to hospitals serving high
percentages of low-income patients. Finding no error, we
affirm.
I.
Pursuant to the Medicare Act, the Secretary of Health and
Human Services reimburses hospitals for the “operating costs of
inpatient . . . services” provided to Medicare and Medicaid
beneficiaries. See 42 U.S.C. § 1395ww. At the end of each
fiscal year, eligible hospitals file cost reports with their “fiscal
intermediaries,” see 42 C.F.R. § 413.20(b); Monmouth Med. Ctr.
v. Thompson, 257 F.3d 807, 809 (D.C. Cir. 2001)—usually
insurance companies that serve as the Secretary’s agents for
purposes of reimbursing health care providers, 42 C.F.R. §§
421.1, 421.3; see generally id. § 421.100-421.128. After
auditing the reports, intermediaries issue “Notice of Program
Reimbursements” (“NPRs”) in which they determine the amount
owed to the hospitals for the fiscal year at issue. See id. §
405.1803(a)(2). Hospitals unhappy with their fiscal
intermediary’s award have 180 days to appeal to the Provider
Reimbursement Review Board (“the Review Board”), 42 U.S.C.
§ 1395oo(a), which issues a decision that the Secretary may
“reverse[], affirm[], or modif[y]” within 60 days, id. §
1395oo(f)(1). Hospitals remaining dissatisfied after the Review
Board or Secretary issues a final decision may seek “judicial
review” by filing suit in the appropriate U.S. District Court. Id.
Known at the time of the events at issue here as the Health
Care Financing Administration (“HCFA”), the agency within
HHS responsible for administering Medicare and Medicaid
promulgated regulations that permit reopening of final NPRs.
3
Two reopening provisions play central roles in this case. One,
42 C.F.R. § 405.1885(a) (1997), provides that an intermediary’s
payment determination or a decision by the Review Board or
Secretary “may be reopened” if its issuer or the affected hospital
moves to do so within three years of the date of the
determination or decision. The other, 42 C.F.R. § 405.1885(b)
(1997), provides (though it has been amended since the events
at issue here) that an intermediary’s determination “shall be
reopened and revised by the intermediary if, within the . . . 3-
year period, the Health Care Financing Administration notifies
the intermediary that such determination or decision is
inconsistent with the applicable law, regulations, or general
instructions.”
The Medicare Act bases payments for “operating costs of
inpatient hospital services” on preset nationally applicable rates,
but those rates are subject to hospital-specific adjustments, 42
U.S.C. § 1395ww(d), one of which, the “Disproportionate Share
Hospital” (“DSH”) adjustment, increases payment rates for
hospitals serving disproportionately high percentages of low-
income patients, id. § 1395ww(d)(5)(F). Several years after
creating the DSH adjustment, Congress enacted legislation that
established detailed criteria for determining eligibility and the
extent of a hospital’s adjustment. Consolidated Omnibus
Budget Reconciliation Act of 1985, Pub. L. No. 99-272, § 9105,
100 Stat. 82, 158-60 (1986) (codified at 42 U.S.C. §
1395ww(d)(5)(F)). HCFA promulgated interpretive regulations
to implement these new statutory provisions, see 51 Fed. Reg.
16,772, 16,776-78 (May 6, 1986), but between 1994 and 1996
four circuits found the regulations inconsistent with one of these
provisions, ruling that HCFA had improperly restricted DSH
eligibility and reduced payments to eligible hospitals. Cabell
Huntington Hosp., Inc. v. Shalala, 101 F.3d 984 (4th Cir. 1996);
Legacy Emanuel Hosp. & Health Ctr. v. Shalala, 97 F.3d 1261
(9th Cir. 1996); Deaconess Health Servs. Corp. v. Shalala, 83
F.3d 1041 (8th Cir. 1996) (per curiam); Jewish Hosp., Inc. v.
4
Sec’y of Health & Human Servs., 19 F.3d 270 (6th Cir. 1994).
Responding to these decisions, HCFA issued Ruling 97-2,
in which it announced it had “chang[ed] its interpretation of [the
statutory provision at issue] to follow the holdings of the United
States Courts of Appeals for the Fourth, Sixth, Eighth, and Ninth
Circuits.” Health Care Financing Administration Ruling 97-2,
at 1 (Feb. 27, 1997) (“HCFAR 97-2” or “Ruling 97-2”).
Significantly, however, HCFA’s new interpretation would have
prospective effect only. As the ruling explained, HCFA would
“not reopen settled cost reports,” and would instead apply its
new interpretation only to cost reports settled thereafter, or to
cost reports for which the hospital had a “jurisdictionally proper
appeal pending on this issue.” Id. at 2.
After HCFA issued Ruling 97-2, two DSH eligible
hospitals, Monmouth Medical Center and Staten Island
University Hospital, filed motions with their intermediaries
pursuant to section 405.1885, seeking to reopen NPRs issued to
them during the three years prior to the ruling. Monmouth, 257
F.3d at 808, 810. When the intermediaries denied these motions
and the Review Board declined to order the proceedings
reopened, the two hospitals sued in the U.S. District Court for
the District of Columbia, which dismissed for lack of
jurisdiction. Id. Reversing, we held in Monmout h Medical
Center v. Thompson, 257 F.3d 807, that the district court had
jurisdiction under the Mandamus Act, 28 U.S.C. § 1361, to order
reopening of the hospitals’ NPRs. Id. at 813-815. We explained
that Ruling 97-2 amounted to a finding that HCFA’s old method
of calculating DSH entitlement was “inconsistent with the
applicable law” for the purposes of section 405.1885(b). Id.
(quoting 42 C.F.R. § 405.1885(b)). Pointing out that the
regulation speaks in mandatory terms—intermediaries “shall”
reopen payment determinations when they receive notice the
determinations are “inconsistent with the applicable law”—we
held that Ruling 97-2 gave intermediaries a clear duty to reopen
5
the NPRs even though the ruling said it had only prospective
effect. Id.
Eight months later, plaintiffs in this case, twenty-six
hospitals serving Medicare and Medicaid beneficiaries, filed suit
under the Mandamus Act, seeking to compel reopening of NPRs
issued to them in the three years preceding Ruling 97-2. Over
250 other hospitals filed similar suits, which (with some
exceptions) the district court stayed pending resolution of the
“core issue” in this case, In re Medicare Reimbursement Litig.,
No. 03-0090 (D.D.C. July 1, 2003) (adopting case management
plan staying actions other than this action). The court then
denied the Secretary’s motion to dismiss and granted plaintiffs’
motion for summary judgment, relying on Monmouth’s holding
that Ruling 97-2 triggered a duty to reopen NPRs pursuant to
section 405.1885(b). In re Medicare Reimbursement Litig., No.
03-0090, slip op. at 8, 11 (D.D.C. Mar. 26, 2004).
The Secretary now appeals.
II.
Under the Mandamus Act, “[t]he district courts shall have
original jurisdiction of any action in the nature of mandamus to
compel an officer or employee of the United States or any
agency thereof to perform a duty owed to the plaintiff.” 28
U.S.C. § 1361. Pursuant to this act, a district court may grant
mandamus relief if “(1) the plaintiff has a clear right to relief;
(2) the defendant has a clear duty to act; and (3) there is no other
adequate remedy available to the plaintiff.” Power v. Barnhart,
292 F.3d 781, 784 (D.C. Cir. 2002) (quoting Northern States
Power Co. v. U.S. Dep’t of Energy, 128 F.3d 754, 758 (D.C. Cir.
1997)). A district court’s determination that a plaintiff has met
these standards is reviewed de novo. See Am. Cetacean Soc’y
v. Baldrige, 768 F.2d 426, 432 (D.C. Cir. 1985) (reviewing de
novo district court’s conclusion that claim passed three-prong
test for mandamus jurisdiction), rev’d on other grounds sub
6
nom. Japan Whaling Ass’n v. Am. Cetacean Soc’y, 478 U.S. 221
(1986). Even when the legal requirements for mandamus
jurisdiction have been satisfied, however, a court may grant
relief only when it finds “compelling . . . equitable grounds.”
13th Reg’l Corp. v. U.S. Dep’t of the Interior, 654 F.2d 758, 760
(D.C. Cir. 1980). As to the equities, we review for abuse of
discretion. See Am. Cetacean Soc’y, 768 F.2d at 444 (reviewing
for abuse of discretion district court’s determination that
granting mandamus relief comports with equity).
We begin with Monmouth. There, we held that two
hospitals, similar in all significant respects to the hospitals in
this case, had satisfied the requirements for mandamus relief.
The Secretary had a clear duty to require the intermediaries to
reopen the hospitals’ NPRs, we held, because Ruling 97-2
amounted to a notice of inconsistency and because section
405.1885(b) mandates reopening when HCFA issues such a
notice. Monmouth, 257 F.3d at 813-15. In finding mandamus
jurisdiction, we held implicitly that the hospitals had a clear
right to relief, and we explained that they had no other adequate
means of obtaining relief. Id. at 811-13, 815. To prevail in this
case, then, the Secretary must identify some reason why the
district court should have denied mandamus relief
notwithstanding our decision in Monmouth. The Secretary
suggests five such reasons.
First, the Secretary devotes over half the argument section
of his opening brief to a direct attack on Monmouth, arguing that
contrary to Monmouth’s holding, Ruling 97-2 did not really
constitute a notice of inconsistency. As “one three-judge panel
. . . does not have the authority to overrule another . . . panel of
the court,” LaShawn A. v. Barry, 87 F.3d 1389, 1395 (D.C. Cir.
1996), we have no authority to consider this argument.
Second, the Secretary argues that the hospitals here failed
to exhaust all avenues for administrative relief, as they never
appealed to the Review Board when their NPRs first issued.
7
This argument, too, is barred by Monmouth. Plaintiffs there
likewise failed to bring such appeals, yet we found that the
district court had mandamus jurisdiction. See 257 F.3d at 815.
Third, the Secretary argues that the hospitals cannot show
an absence of alternate avenues for relief because, unlike the
Monmouth plaintiffs, they never sought reopening pursuant to
section 405.1885(a). Yet neither when we decided Monmouth
nor when HCFA issued Ruling 97-2 did a motion for reopening
offer any chance for the hospitals to obtain relief. Section
405.1885(a) provides that “[a]ny . . . request to reopen must be
made within 3 years of the date of the notice of the
intermediary,” and by the time we decided Monmouth, the three-
year period had long since passed for the NPRs at issue here.
Hence, had the hospitals sought reopening following Monmouth,
their intermediaries would have dismissed their motions as
untimely. True, a motion filed in 1997—when HCFA issued
Ruling 97-2—would have been timely with respect to these
NPRs. Ruling 97-2, however, purported to be prospective only:
it barred intermediaries from reopening closed NPRs to
recalculate DSH entitlement in accordance with the new
interpretation of the statute. See HCFAR 97-2 at 2. As counsel
for the Secretary conceded at oral argument, intermediaries were
not at liberty to ignore this bar even if they believed the ruling
amounted to a notice of inconsistency. Tr. of Oral Arg. at 4-5;
see also Bethesda Hosp. Ass’n v. Bowen, 485 U.S. 399, 406
(1988) (noting that “[n]either the fiscal intermediary nor the
[Review] Board has the authority to declare regulations
invalid”). Moreover, hospitals may not seek judicial review of
an intermediary’s denial of a motion to reopen a payment
determination. Your Home Visiting Nurse Servs., Inc. v.
Shalala, 525 U.S. 449, 456-57 (1999). Consequently, the
hospitals could not have obtained relief by seeking reopening in
1997.
The Secretary’s fourth argument, like the second and third,
8
focuses on the hospitals’ failure to appeal or move for
reopening. Conceding that section 405.1885(b) creates a duty
to reopen NPRs of all affected hospitals when HCFA issues a
notice of inconsistency, the Secretary argues that only those
hospitals which either appealed to the Review Board or sought
section 405.1885(a) reopening, as did the Monmouth hospitals,
have a legally cognizable interest in the reopening of their
NPRs. But given that section 405.1885(b) does not require
hospitals to file anything at all to obtain relief, we see no basis
for holding that only those hospitals that appealed or sought
section 405.1885(a) reopening have a personal right to the
reopening required by section 405.1885(b). Indeed, the fact that
section 405.1885(b) contains no prerequisite for relief beyond a
notice of inconsistency suggests that all hospitals
undercompensated due to an erroneous interpretation of the law
have a personal right to section 405.1885(b) reopening.
Finally, the Secretary contends that the equities require
denial of mandamus relief. Reviewing the district court’s
balancing of the equities for abuse of discretion, Am. Cetacean
Soc’y, 768 F.2d at 444, we find none.
According to the Secretary, granting relief would be
inequitable because the hospitals waited so long to file suit. The
district court rejected this argument, reasoning that the hospitals
had sued “just eight months [after Monmouth], hardly an
inordinate time lag.” In re Medicare Reimbursement Litig., No.
03-0090, slip op. at 14 (D.D.C. Mar. 26, 2004). While eight
months would not constitute “an inordinate time lag” under the
circumstances of this case, the hospitals slept on their rights far
longer: like the Monmouth plaintiffs, they could have sued after
HCFA issued Ruling 97-2. Asked at oral argument to explain
why the hospitals had not done so, counsel claimed that Ruling
97-2 failed to give them “fair notice of their right to reopening.”
Tr. of Oral Arg. at 20. But the Monmouth plaintiffs had
sufficient notice to sue, and when pressed, counsel admitted that
9
his clients “could have” done so as well. Id. at 22. That said,
we see no basis for concluding that the district court abused its
discretion by rejecting the Secretary’s timeliness argument, for
the Secretary has failed to demonstrate that he suffered any
prejudice due to the hospitals’ unexplained delay. Cf. Natural
Res. Def. Council v. Pena, 147 F.3d 1012, 1026 (D.C. Cir. 1998)
(finding prejudice necessary for delay to warrant denial of
injunctive relief).
The Secretary claims that reopening the NPRs “would be a
very difficult and uncertain process, as well as being
extraordinarily time-consuming to audit and verify.”
Appellant’s Br. at 33 (quoting Decl. of Stephen Phillips). Yet
the Secretary explains neither why reopening would be more
burdensome now than it would have been five years ago nor
why reopening would create more uncertainty now than it would
have then. In fact, the hospitals assure us that they, not the
Secretary, will “have to shoulder the burden of locating and
presenting . . . data from prior years for the fiscal
intermediaries” to use in recalculating DSH entitlement “upon
reopening.” Appellee’s Br. at 32. Elaborating at oral argument,
hospital counsel explained that under the terms of a ruling issued
by the Secretary, in any reopening the “burden [rests] on the
hospital to produce the data” needed to recalculate its DSH
entitlement, and “the hospital takes nothing if it can’t produce
the information.” Tr. of Oral Arg. at 29. Neither in his brief nor
at oral argument did the Secretary challenge either of these
assertions. On the record before us, then, we think it obvious
that if the delay has increased the risk of lost evidence or the
administrative burdens associated with reopening, only the
hospitals will suffer. As the district court noted, moreover, even
if the delay increased HCFA’s administrative burden, the
additional “burden [would] not outweigh the public’s substantial
interest in the Secretary’s following the law.” In re Medicare
Reimbursement Litig., No. 03-0090, slip op. at 15 (D.D.C. Mar.
26, 2004).
10
The Secretary also invokes “important principles of finality
and repose,” asserting that they “would be greatly undermined”
were we to uphold the district court. Appellant’s Br. at 33. The
Secretary adds that “a substantial and unanimous body of law
protect[s] the integrity of decisions that are closed and final,
regardless of whether the rule of decision upon which they are
based is invalidated . . . later.” Id. at 33-34. Yet the Secretary’s
own regulations provide for reopening when HCFA “notifies an
intermediary that [a] determination or decision is inconsistent
with the applicable law.” 42 C.F.R. § 405.1885(b) (1997). To
show that the interest in finality warrants denying mandamus
relief, then, the Secretary must explain why this interest became
more important between 1997, when Ruling 97-2 triggered the
hospitals’ right to section 405.1885(b) reopening, and 2002,
when the hospitals sued to enforce that right. The Secretary,
however, has failed to do so. See supra at 9.
In his opening brief, the Secretary takes pains to point out
the extraordinary sums at stake in the hundreds of cases now
pending in the district court—more than $1 billion, according to
the Secretary. Yet as his counsel rightly conceded at oral
argument, Congress imposed on the Secretary a clear statutory
duty to pay the hospitals these funds. Having to pay a sum one
owes can hardly amount to an equitable reason for not requiring
payment.
The judgment of the district court is affirmed.
So ordered.